Shri Vardhman Milk Dairy Pvt. Ltd. Vs Commissioner of CGST & Central Excise (CESTAT Delhi)
The CESTAT, New Delhi in the case of M/s Shri Vardhman Milk Dairy Pvt. Ltd. v. Commissioner of CGST & Central Excise [Final Order Nos. 50970–50971/2025, dated July 03, 2025] held that the activity of chilling, pasteurisation, standardisation and pouch packing of milk amounts to ‘manufacture’ under Chapter Note 6 of Chapter 4 of the Central Excise Tariff Act, 1985, and therefore cannot be taxed as Business Auxiliary Service under Section 65(19) of the Finance Act, 1994.
Facts:
M/s Shri Vardhman Milk Dairy Pvt. Ltd. (“the Appellant”) carried out activities on behalf of M/s Reliance Dairy Foods Ltd. under agreement, including chilling, cutting open bulk milk, pasteurisation, standardisation, and packaging of milk into pouches for retail sale. The Department issued a show cause notice dated October 24, 2013, alleging that these activities amounted to providing Business Auxiliary Service under Section 65(105)(zzb) read with Section 65(19) of the Finance Act, 1994, and demanded service tax of ₹43,64,774 invoking extended limitation along with interest and penalties.
During adjudication, it was held that only packing amounted to ‘manufacture’, but not the other processes. Consequently, the demand was partially reduced. On cross-appeals by both parties, the Commissioner (Appeals) rejected the Appellant’s appeal and upheld full demand. The Appellant then preferred appeals before the Tribunal.
